LEAN and Sustainable Supply Chains CHAPTER 13

Learning Objectives 1. Describe how Green and Lean can complement each other. 2. Explain how a production pull system works. 3. Understand Toyota Production System concepts. 4. Summarize important attributes of a lean supply chain. 5. Analyze a supply chain process using value stream mapping. 6. Know the principles of supply chain design.

What is Lean? Is it skinny? Is it less people? Is it working harder? Is it making less? What is Lean?

Why no Sir! Lean is none of those things. Lean is an ever evolving philosophy based on proven principles and practices aimed at the elimination of wastes. What is Lean?

Lean is a continuing process of change involving everyone in the organization. What is Lean?

Designing processes for your business 1. Deliver exactly what the customer needs (defect free) 2. Be able to deliver customized value to each individual customer 3. Deliver on demand exactly as requested 4. Respond immediately to problems or changes 5. Have no waste

LEAN in general Continued Value chain: each step in the supply chain should create value If it does not create value, it should be removed Customer value: something for which the customer is willing to pay Waste: anything that does not add value from the customer’s perspective LO 1

Understanding Value-Added Activity

Understanding Value-Added What would you be willing to pay for when ordering a hamburger? ___ Meat ___ Dough ___ Ketchup ___ Electricity to run ovens ___ Electricity to run outdoor lights left on accidentally ___ Person paid to inspect take- out orders ___ Cost of hamburgers not sold ___ Distribution Center ___ Cost of radio, TV, web ads ___ Cost of delivery truck signs ___ Cost of store manager ___ Cost of cleaning ___ Cost of menus ___ Employee training ___ Profit

TOYOTA PRODUCTION SYSTEM

The “4P” model 1P 2P 3P 4P PROBLEM SOLVING (Continuous Improvement And Learning)

The “4P” model 1P 2P 3P 4P PROCESS (Eliminate Waste)

The “4P” model 1P 2P 3P 4p PEOPLE AND PARTNERS (Respect, Challenge, and Grow Them)

The “4P” model 1P 2P 3P 4P PHILOSOPHY (Long-Term Thinking)

Understanding Waste Waste: anything that adds cost or time without adding value

Understanding Waste Overproduction – producing work prior to it being required is waste and is the greatest of all the wastes Producing reports no one reads or needs Making extra copies ing, faxing same document Entering repetitive information on multiple documents Ineffective meetings

Understanding Waste Waiting – for people, signatures, and information is waste. This is “low hanging fruit” which is easy to reach and ripe for the taking. Excessive signatures or approvals Dependency of others to complete tasks Delays in receiving information Computer program revision problems Cross-departmental resource commitments Not a priority for someone to complete

Understanding Waste Motion - any movement of people, paper, electronic exchanges that does not add value is waste Searching for computer files Searching for documents in file cabinets Repeatedly reviewing manuals for information Hand carrying paper to another process Cross-departmental resource commitments Not a priority for someone to complete

Understanding Waste Transport - affects the time of delivery of any work within an office Delivering unneeded documents Excessive filing of work documents Over-addressed distribution lists Hand-carrying paper to another process Cross-departmental resource commitments Mis-prioritization

Understanding Waste Overprocessing - putting more work or effort into the work required by internal or external customers is waste Duplicative reports or information Repetitive data entry Incorrect information being shared Constantly revising documents Ineffective meetings and no agendas Duplicative documentation Lack of accurate project planning

Understanding Waste Inventory (Time) - work piles, excessive supplies, and excessive signature requirements are waste Files awaiting signatures or approvals Work awaiting task completion by others Obsolete files Obsolete office equipment Not sufficient training of back-ups Purchasing excessive office supplies.

Understanding Waste Defects (or mistakes) - refers to all processing required creating a defect or mistake and the additional work required to correct it Data entry errors Pricing errors Forwarding incomplete documentation Incorrect information on document Inefficient file system on PC or in cabinet Not appropriate staffing to service customer

Understanding Waste Underutilization of People - is a result of not placing people where they can (and will) use their knowledge, skills, and abilities to the fullest (8 th Waste) Project deadlines not being met. Work loads not evenly balanced due to lack of cross-training High absenteeism and turnover Inadequate performance management system Incomplete job skill assessment prior to hiring

JIT PULL SYSTEM

Minimizing Waste: Kanban Production Control Systems Storage Part A Machine Center Assembly Line Material Flow Card (signal) Flow Withdrawal kanban Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place This puts the system back were it was before the item was pulled The process begins by the Assembly Line people pulling Part A from Storage Production kanban

Other Approaches Kanban squares: marked spaces on the floor to identify where material should be stored Container system: the container is used as a signal device Colored golf balls: appropriate golf ball signals production LO 2

Determining the Number of Kanbans Needed Setting up a kanban system requires determining the number of kanbans cards (or containers) needed Each container represents the minimum production lot size An accurate estimate of the lead time required to produce a container is key to determining how many kanbans are required LO 2

The Number of Kanban Card Sets LO 2

Minimized Setup Time Reductions in setup and changeover times are necessary to achieve a smooth flow Kanban significantly reduces the setup cost The organization will strive for a lot size of one LO 2

Work Center 1 Work Center 2 Work Center 3 Container with 2 parts (lot size = 2) Flag or signal marker

© 1997 Prentice-Hall, Inc JIT ‘Pull’ System Simulation

Lean Supply Chains Value stream: the value-adding and non- value-adding activities required to design, order, and provide a product or service Waste reduction: the optimization of the value-adding activities and the elimination of non-value-adding activities LO 4

Components of a Lean Focused Supply Chain Lean suppliers Able to respond to changes Lower prices Higher quality Lean procurement Key is automation (e-procurement) Suppliers must see into the customers’ operations and customers must see into their suppliers’ operation Lean warehousing Eliminate non-value-added steps and waste in storage process LO 4

Components of a Lean Focused Supply Chain Continued Lean logistics Optimized mode selection and pooling orders Combined multi-stop truckloads Optimized routing Cross docking Import/export transportation processes Backhaul minimization Lean customers Understand their business needs Value speed and flexibility Establish effective partnerships with suppliers LO 4

Value Stream Mapping Value stream mapping: a special type of flowcharting tool for development of lean processes Used to visualize product flows through various processing steps Need a full understanding of the business including production processes LO 5

“If you can't describe what you are doing as a process, you don't know what you're doing.” W. Edwards Deming ART of OBSERVATION Clip

Manufacturing Process Map LO 5

Service Process Current Map CUSTOMERS SUPPLIERS INFORMATION FLOW PROCESS STEPS DATA COLLECTION

Lean Implementation Requirements: Total Quality Control Worker responsibility Measure SQC Enforce compliance Fail-safe methods Automatic inspection

Lean Implementation Requirements: Work with Vendors Reduce lead times Frequent deliveries Project usage requirements Quality expectations

Any Questions?